FOREX short term outlook - EUR/USD, USD/JPY, NZD/USD.

General view:

Market seem to be low on volume this morning while sharp moves are paused by periods of appalling volatility. Today’s main focus is Fed’s president, Janet Yellen testimony in Congress, where some details over Fed’s view on 1Q slowdown and possible recovery in coming months may be revealed. Our current assessment shows no signs of significant change in Federal Reserve’s and FOMC’s views on economy (as last FOMC statement proves), but some heavy questions may be difficult to answer and markets like to interpret words in their own way. Therefore we recommend to fasten seatbelts for that time (start at GMT 2:00 p.m.).

EUR/USD pair is heavy after yesterday’s rally towards 1.3950. Recent corrective move touched 1.3910 level (50% retracement) and bounced about 10 pips. More demand can be expected on 1.3900 figure but also in 1.3870/85 area which were strong resistance in previous days.

Any upward move will meet resistance at 1.3950 (yesterday’s high) and 1.3965 (March high which is medium term peak). Many investors are already targeting 1.4000 but that’s not a guarantee that we will reach it, though it could be good target level for short-term bulls.

USD/JPY is losing ground for the third day in a row.

Pair retraced from tested 103 resistance and touched 101.50 recently.

Below that we have key support area 101.30/101.00 which was the bottom for couple months. We suspect that plenty of stop orders could be placed below this area, as JPY bears would like to defend their long USD/JPY exposition. We anticipate strong defense of this key level, but keep in mind, that Janet Yellen’s testimony may drop pair down the cliff right into these stop loss orders – in this case 100.00 figure would be exposed.

Possible milestones for USD/JPY bulls, after bounce from 101 may lay at 102.00 (today’s Pivot R1, 61.8% – 76.4% retracement of yesterday’s high-low, round level) and further at 102.70/103 (today’s Pivot R3, recent peak – triple top).

NZD/USD breaking lower after unemployment data.

Last night’s data showed that New Zealand unemployment rate stalled at 6.0% while median showed decline to 5.8%. With that info bears sold pair heavily from the pick right below yesterday’s low and today’s Pivot S1 at 0.8680.

Further resistance now seen at 0.8700 but the pair seems red enough to go further down without any significant retracement.

Next meaningful support levels are: 0.8630 (Pivot S2, 1-May high) and 0.8600 (round level, 1-2 May low).

Of course Fed’s president congressional testimony will most probably mark its sign on Price Action.